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Transcript of Accounting
* It will list the service revenue followed by all the expenses incurred during that financial period.
Owners Equity Statement
* The accounting equation states assets equals liabilities plus owners' equity, which rephrased states owners' equity equals assets minus liabilities.
* Owners' equity is important because it shows how much is invested into the firm through ownership, not debt.
Accounting can be defined as the theory and system of setting up, maintaining, and auditing the books of a firm. It is the art of analyzing the financial position of a business through its sales, purchases, and overhead. These records must be kept in chronological order and must be summarized in a useful format. It is also responsible for identifying information on the transactions, analyzing it and then interpreting each and every document.
A) Identify the transaction.
B) Prepare document.
C) Identify accounts.
D) Record the transaction.
The Accounting Cycle
After the T-accounts are created, the information must be transferred to a trial balance.
The first step in the accounting process is recording journal entries and naturally this requires a transaction. These records must be kept in chronological order and must be summarized in a useful format.
The next step is to create T-accounts or ledger accounts by taking each account and listing all the debits and credits to that account.
Mountain Bike Rentals
November 20, 2012
A working paper used to collect information from the ledger accounts for use in completing end-of-period activities. Is done as the fifth step!
* Using the total from the income statement which is found by subtracting expenses from revenue, the owner's equity statement is prepared.
Finally, the balance sheet is completed by listing all the assets, liabilities, and owner's equity.
Balance Sheet Example
To close revenue into income summary.
To close expense accounts into income summary.
To close income summary to owner's equity account.
To close owner's draw account to owner's equity.